You may recall that the island republic of Cyprus needed to come up with $10 billion or so in fast money, in order to meet the European Union’s requirements for massive emergency loans. The government of Cyprus originally planned to do this by seizing part of the balance in every bank account in the country – 6.7 percent for the ‘”little guy,” 9.9 percent for wealthy depositors.

This proved both politically unworkable – no plan constructed by any socialist-leaning government on Earth can involve the “little guy” having skin in the game – and a dangerous violation of European Union deposit insurance, which is supposed to guarantee the first 100,000 euros of every bank account. The Cypriot legislature shot down the broad-based asset seizure plan with a unanimous vote. According to Reuters, this decision was based, in part, on a belief that the Russians could be prevailed upon for alternative financing, to the tune of 5 billion euros in new loans, plus better repayment terms on Cyprus’ outstanding balance of 2.5 billion euros. The plan involved offering Russia access to the offshore gas deposits surrounding Cyprus. Since Russian businessmen (many of them alleged to be shady characters) had a huge amount of cash tucked away in the oversized banks of Cyprus, it was thought Russia would find a bailout loan to be in its best interests. The Russian government has been vocally angry about the EU bailout deal and theft of money from depositors.

To the apparent surprise of Cypriot finance minister Michael Sarris, Russia turned a deaf ear to their pleas:

After a frosty initial meeting on Wednesday, at which his Russian counterpart offered nothing in response to his request for a new 5 billion euro loan and easier repayment terms on an existing 2.5 billion euro credit, Sarris was left to stew in his suite at the Lotte Plaza hotel on Moscow’s Garden Ring.

Russian gas monopoly Gazprom denied reports that it was considering lending Cyprus money in return for future access to its gas, and VTB, Russia’s number two bank, disavowed any interest in buying Laiki.

The Russians kept Sarris waiting all day Thursday. Talks only resumed at 9 p.m. and went nowhere. By midnight, he knew he would be returning to Nicosia the next morning empty-handed, although his hotel suite was booked until Monday.

Great, even more government debt. Those Moscow hotels aren’t cheap.

Last week, we learned that the revised Cyprus bailout plan – shoved rapidly into “done deal” status without a chance for the legislature to block it – would preserve the first 100,000 euros of insured deposits in every account… but grab a huge chunk of balances over 100k. How much? Early drafts of the plan floated 15 percent, but soon it was up to 40 percent… and the BBC says it might end up being more like 60 percent… or maybe even 100 percent. Here’s how the BBC lays out current plans to replace hard currency with worthless IOUs and shares in a dilapidated banking system that no big depositor in his right mind will ever use again:

Bank of Cyprus depositors with more than 100,000 euros could lose up to 60% of their savings as part of the bailout, officials say.

The central bank says 37.5% of holdings over 100,000 euros will become shares.

Up to 22.5% will go into a fund attracting no interest and may be subject to further write-offs.

The other 40% will attract interest – but this will not be paid unless the bank performs well.

Of course, with that kind of scalp-shredding “haircut” on its way, it is essential to impound the assets in the Cypriot banks, lest big depositors withdraw their money and head for the hills. That would make it necessary to seize even more of whatever money remains, because the goal is 5.8 billion euros or bust. If the pool of cash that can be raided dwindles enough, the government won’t be able to get its 5.8 billion by taking 60 percent of balances over 100,000 euros. They’ll have to take more.

Controls on the cash that can be withdrawn from local ATMs have kept the Cypriot business class from escaping, but how about those horrid foreign investors – you know, the people who have been propping up the economy of Cyprus for years by taking advantage of the “bank haven” created specifically to attract their money? Well, that’s where things get interesting… because according to Reuters, they’re already gone.

In banknotes at cash machines and exceptional transfers for “humanitarian supplies”, large amounts of euros fled the east Mediterranean island before and after Cypriot lawmakers stunned Europe by rejecting a levy on all bank deposits.

EU negotiators knew something was wrong when the Central Bank of Cyprus requested more banknotes from the European Central Bank than the withdrawals it was reporting to Frankfurt implied were needed, an EU source familiar with the process said. “The amount the Cypriots mentioned… on a daily basis was much less than it was in reality,” the source said.

Confusion over just how much money was pulled out of Cyprus’ banks is illustrative of the confusion surrounding the negotiations as a whole. Representing just 0.2 percent of the euro zone economy, Cyprus nevertheless threatened to reignite the bloc’s debt crisis. Cyprus’ problems began in Greece – it is heavily exposed to the euro zone’s first bailout casualty.

No one knows exactly how much money has left Cyprus’ banks, or where it has gone. The two banks at the centre of the crisis – Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus – have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia’s Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks’ largest depositors.

[…] German Finance Minister Wolfgang Schaeuble said the bank closure had limited capital flight but that the ECB was looking closely at the issue. He declined to provide figures.

A Russian bank plugged into the Cypriot system was allowing unlimited withdrawals? No one really knows how much money escaped through those channels, plus suspiciously large withdrawals made for reasons that ostensibly escaped the controls on bank capital? On Sunday, insiders were saying that virtually all of the 8.1 billion Euros in the dying Laiki bank were gone, although the government disputes that report.

Of course, rumors are swirling of big-money depositors tipped off by political allies in time to rescue most of their money. It has also been theorized that the Russian government is secretly pleased by these events, because they wanted capital repatriated to Russia… and a few well-placed midnight whispers about the impending collapse of the Cypriot banking system might prove to be the most efficient repatriation plan in the history of mankind.

Reuters reports that EU bigwigs are still patting themselves on the back for screwing the fat cats who sheltered all those billions in the collapsing bank paradise of Cyprus…

German Finance Minister Wolfgang Schaeuble said Berlin had achieved exactly what it sought in exchange for the 10 billion euro financial rescue – that creditors and uninsured depositors in the two biggest Cypriot banks should share the load.

“This is bitter for Cyprus but we now have the result that the (German) government always stood out for,” he said.

[…] “To all those who say that we are strangling an entire people … Cyprus is a casino economy that was on the brink of bankruptcy,” French Finance Minister Pierre Moscovici said.

… but it looks like the most well-connected gamblers may have gotten their money out of that “casino economy” already, leaving those who remain to “share” an even larger “load.”